How to get a Business Loan?

A Business is a loan specifically intended for business purposes. It could be to set up a new business or to expand the existing one.

An existing business might need financing for:

1. purchasing assets such as land, factory, property, etc.

2. leasing a factory or shop or purchasing new machinery.

3. working capital requirements.

4. basic operating expenses such as overheads and salaries.

To get a business loan first you need to determine the type of business loan you need. Here are 4 different types of business loans available for entrepreneurs in India.

a. Term Loan

Term Loan is one of the most common types of business financing. It is a monetary loan that is repaid in regular payments over a set period of time. The loan could be secured or unsecured. The amount available depends on the business' credit history.

Advantages of Term Loan:

1. Flexibility of Tenor - Borrowers of a term loan can select a suitable term that allows them to pay their EMIs as per their repayment capacity.

2. Minimum eligibility requirements & hassle-free documentation.

3. Cost of loan is limited - Borrowers have an idea of the total cost of the loan they are required to pay.

Disadvantages of Term Loan:

1. One needs to keep a track of due dates for EMI

2. Have to make optimum use of the loan amount in the time period.

b. Start-Up Business Loan

A start-up loan is for new businesses. Applicants for such loans may not have a great credit history on their company due to a lack of business vintage. Thus, to judge the business loan eligibility, the lender takes into account the business owner's personal credit profile along with that of the company.

MUST-READ: How to Get a Startup Loan in India?

c. Working Capital Loan

Working capital loans are taken to overcome the shortage of cash to operate a business on a day-to-day basis. It provides the business with a cash flow necessary to operate the business. Most eligible applicants of a working capital loan are service providers, manufacturers, wholesalers, retailers or traders engaged in exports and imports.

Apply for a Working Capital Loan

Advantages of a Working Capital Loan:

1. Get Instant cash to cover operating expenses

2. The business owner does not have to part with equity

Disadvantages of a Working Capital Loan:

1. Might have to give a collateral

2. Monthly Installments

d. Loan against property for SME

Loan against property is a type of loan where the applicant has to keep his/her property as collateral for the loan. The borrower can apply for funds against either a residential or commercial property.

The value of the property will decide the potential amount that can be sanctioned as a loan. Financial Instiutions generally sanction 65% of the value of the property as a loan. The tenure offered in LAP is 15 years subject to age norms while the rate of interest varies between 12% to 16%.

Apply for a Loan against Property SME Loan

STEPS TO APPLY FOR A BUSINESS LOAN

• Fill up the online application form

• Submit all the relevant documents required for the loan

• Get money in Bank within 24 hours

Note: DGM Capital is an Investment Banking and Wealth Management Firm serving clients across various verticles like M&A Advisory, Business/Enterprise Valuation, Investment Advisory, and Business Financing.